Azure Power India Pvt Ltd, a provider of solar energy to commercial, government and utility customers, is looking to set up two solar energy plants in Karnataka. The company plans to set up a 2 Mw solar power plant in Kolar and a 10 Mw plant in Bagalkot in north Karnataka for a combined investment of close to Rs 200 crore, a senior company official said.

“We have received the state government approval and signed a memorandum of understanding with them recently. We are in the process of signing a power purchase agreement. We have acquired 10 acres of land in Kolar and are seeking to acquire 50 acres in Bagalkot,” Inderpreet S Wadhwa, chief executive officer, Azure Power told Business Standard.

He said the power plants will be up and running by March 2011. The technology required for the plant will be imported from the US and the modules will be sourced from local companies like Tata BP Solar, HHV Solar among others.

The company is looking at a site, about 5 km from Bagalkot and sought land from the state government. The 2 Mw plant at Kolar has been cleared by the Karnataka Renewable Energy Development Ltd (KREDL) and the 10 Mw plant is yet to be approved by them, he said.

Wadhwa said the projects would be executed in a debt to equity ratio of 70:30. While the company has sufficient funds to invest towards the equity portion, it is in the process of working with both the US and Indian banks. The funds are being raised from Overseas Private Investment Corporation, a US treasury bank. On the equity side, our US parent will invest, he said.

The company has already commissioned its first solar power project in India. It has set up a 2 Mw power plant at Amritsar district of Punjab.

Azure Power plans to enter into a power purchase agreement with the National Thermal Power Corporation (NTPC) Ltd with a buyback arrangement with the local electricity supply company. NTPC will bundle thermal power with solar power and sell it to the state grid.

“The cost of solar power is very high and it works out to Rs 17-18 per unit. The NTPC has agreed to blend the solar power with thermal power. They have an unallocated pool of about 1,000 Mw which they will sell back to the utility. The blended cost to the utility works out to Rs 5 per unit. Though we connect to the grid here, we will have a tripartite agreement with NTPC and the Bescom, wherein Bescom will pay only Rs 5.50 per unit,” he said.

Wadhwa said the company plans to take up its installed capacity to 100 Mw in the country in the next three years for an investment of Rs 1,500 core. The breakeven period will be about 6-7 years on an individual project basis, he said.

He said the Karnataka government has offered a 10-year tax holiday to the company.